The Loop Management System for Innovative Firms

More than 2,500 years ago, Heraclitus, the Greek philosopher, postulated the timeless words: “Change is the only constant in life”. In business, change is what we deal with daily. We experience change and live change. Change brings disruption, dislocation and glory.

I know of only one insurance policy against the irrelevance change can bring in markets. The policy is Innovation. With innovation, you overcome commoditization and possibly outgrow your industry. Innovation unlocks new elements in firms, delivering better processes which drive productivity gains, at both public and private institutions.

Innovation hates bureaucratic institutions with their conformance working management systems.  Lacking organic renewal, those institutions with their systemic failures die, over time.

How do you build a firm?

Think of what happens in bureaucratic institutions. In those firms, one person makes most of the decisions. Ideas emerge from different quarters but they have to be ratified by one person who is the judge, the jury and the executioner. If he does not like the idea, nothing happens. Then contrast with how it happens in places like London, Silicon Valley and Paris. There, the idea could have many routes to funding and then products emerge. In that case, many people –thousands- would be making decisions on the ideas.

Management is nothing but “managing” things. The foundation of management is designed to give order in the industrial age economies where the management systems advanced. Bosses manage – they bring order, discipline, focus, efficiency, alignment and control. Interestingly, most management systems were not designed to help people to create, adapt and innovate.

Your challenge in leadership is to find a way to take out “management” (yes, the bureaucracy) which exists in your firm while retaining the great benefits of management which include coordination, order and control. I want you to unbundle the thinking where only you can be the jury, the judge and the executioner.

That was what killed Kodak which invented digital photography but failed to adapt. The management did what was supposed to be done [controlled resources to create digital photography], but it needed another layer to make the leap. That layer is unlocking the mindset out of products and services in order to critically understand the elements of the markets. Those elements are the frictions which the firm exists to fix.

The liturgy of management may put you into the loop of products and services but that layer would give you the higher call. Kodak thought the business was making film photography. Unfortunately, Facebook helped it to understand that the business was really about sharing moments and memories.

Build a business where your staff members are like the Silicon Valley entrepreneurs who have different paths to make ideas become products. They become innovators within the firm, helping you make great things. I call it the Loop Management System where everything revolves around all talents, irrespective of the levels of the positions. It is like a loop where every part matters. In that ecosystem, the jury, the judge and the executioner are now structured to be the team, and not just the boss.

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